Mallory Luongo, Inc. manufactures five models of kitchen appliances at its Mesa
ID: 2364294 • Letter: M
Question
Mallory Luongo, Inc. manufactures five models of kitchen appliances at its Mesa plant. The company is installing activity-based costing and has identified the following activities performed at its Mesa plant.1.
Designing new models.
2.
Purchasing raw materials and parts.
3.
Storing and managing inventory.
4.
Receiving and inspecting raw materials and parts.
5.
Interviewing and hiring new personnel.
6.
Machine forming sheet steel into appliance parts.
7.
Manually assembling parts into appliances.
8.
Training all employees of the company.
9.
Insuring all tangible fixed assets.
10.
Supervising production.
11.
Maintaining and repairing machinery and equipment.
12.
Painting and packaging finished appliances.
Having analyzed its Mesa plant operations for purposes of installing activity-based costing, Mallory Luongo, Inc. identified its activity cost centers. It now needs to identify relevant activity cost drivers in order to assign overhead costs to its products.
Identify activity cost drivers.
(SO 4)
Instructions
Using the activities listed above, identify for each activity one or more cost drivers that might be used to assign overhead to Mallory Luongo's five products.
Explanation / Answer
1. Designing new models. Cost driver (CD) : Activity drivers for this shape of activity can be work in of machine set-ups to work out a batch of products or engineering change notices. 2. Purchasing raw materials and parts. CD:Facility-level activities -Facility mutilate costs include items normally described as general overheads 3.Storing and managing inventory. CD:Facility-level activities -Facility mutilate costs include items normally described as general overheads 4.Receiving and inspecting raw materials and parts. CD:Facility-level activities -Facility mutilate costs include items normally described as general overheads 5.Interviewing and hiring new personnel. CD:Facility-level activities -Facility mutilate costs include items normally described as general overheads 6.Machine forming sheet steel into appliance parts. CD :Activity drivers for this shape of activity can be work in of machine set-ups to work out a batch of products or engineering change notices. 7.Manually assembling parts into appliances. 8.Training all employees of the company. CD:Facility-level activities -Facility mutilate costs include items normally described as general overheads 9.Insuring all tangible fixed assets CD:Facility-level activities -Facility mutilate costs include items normally described as general overheads. 10Supervising production. CD: Batch activities are performed on batches of products reasonably than individual strife units. Activity drivers - number of Production runs. 11.Maintaining and repairing machinery and equipment. CD:Facility-level activities -Facility mutilate costs include items normally described as general overheads. 12.Painting and packaging finished appliances. CD: Activity drivers for this complex of activity can be direct labour hours or machine hours.
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